Semiconductors And Consumer Cyclical Stocks Lead Tuesday's Sell-Off; Stocks To Watch Wednesday

The U.S. stock market closed on Tuesday at session lows, breaking through a short-term trading range to the downside. The S&P 500 SPY pared 1.58% on the day, while the tech-heavy Nasdaq NDAQ lost just over 2%. Traders may jump on Tuesday’s weakness at the open on Wednesday as many on Wall Street have been wondering how in the world this market isn’t significantly lower, given banking crises, red-hot inflation, unprecedented interest rate hikes and recession fears on the horizon. Among the weakest sectors on the day were consumer cyclical, or retail, stocks and semiconductors, which technically are a sub-sector of information technology. Below, we take a quick look at some of the notable losers on Tuesday with the expectation these names may also be active on Wednesday morning. 

SPDR S&P Retail ETF XRT

The XRT, a liquid, diversified ETF, that tracks the performance of leading consumer cyclical stocks was battered during Tuesday’s session, falling 3.27% and closing right on the lows for the day at $60.57. 

Chewy, Inc. CHWY

The high-flying pet-food retailer was a fantastic short on Tuesday, with the stock falling throughout the session and closing on the day’s lows. Chewy lost 6.66% and closed at $31.25. A break of $30.00 in the coming days, a level that has offered strong support previously in the stock, could bring out big CHWY sellers in droves. This is a name to watch at the open on Wednesday. 

The Gap Inc. GPS

Mall clothing retailer The Gap took it on the chin on Tuesday, with the stock falling more than 6% to close at $9.43. The next significant previous support level for this stock would be $9.00 and do not be surprised to see GPS test that level sooner rather than later if the market continues to soften up in the coming days. A significant break of $9.00 could open up the floodgates for more selling from technical-oriented traders in this name as the $8.00-$9.00 area has been a line in the sand on the downside in GPS previously. 

Nordstrom JWN

Not surprisingly, Nordstrom took a haircut on Tuesday along with the rest of the retail sector. The stock closed near session lows, down 6.34% to $15.21. Look for this name to continue significantly lower if the overall market continues to soften and fears about a deeper-than-anticipated recession begin to ramp up once again. The 52-week low in JWN is just below at $14.91 – a level that traders will want to keep an eye on if selling in the name continues on Wednesday morning. 

Peloton Interactive PTON

Peloton shares broke through an upward supporting trendline around a week ago and the stock continued to deteriorate from a technical perspective on Tuesday as prior support in the $9.00 range was taken out. The next foreseeable support area in the name would be at $8.00 and it is not inconceivable that this stock will test that level sooner rather than later as considerable technical damage has been done in the preceding two weeks. The stock fell 5.67% to close at $8.81 on Tuesday – right on session lows. Look for potential follow-through to the downside on Wednesday’s open. 

Victoria’s Secret VSCO

Shares shed 5.56% on Tuesday, closing at $31.08. The 52-week low in this stock is at $26.14 and a look at the chart suggests a break of $30.00 to the downside may spell near-term trouble for this stock. Volume was brisk on Tuesday, as it has been on big down days for a couple of months. If the S&P opens deep in the red on Wednesday, look for VSCO to challenge prior support at $30.00 right away. 

VanEck Semiconductor ETF SMH

Persistent selling in the chip space took the SMH stock down over 3% on Tuesday, closing at $239.18. This had been a hot ETF in 2023, gaining almost 19% year-to-date. After Tuesday, however, the price action in the fund appears to be rolling over. Nevertheless, SMH actually popped better than 1% in the after-hours, likely on strong earnings from a component company. 

Navitas Semiconductor Company NVTS

This high-beta semiconductor name got absolutely clobbered on Tuesday, with the stock paring more than 12% to close at $5.64. The last two trading sessions have seen NVTS ring up huge red candles and the stock has plunged below the 20-day sma and 50-day sma and could find itself zeroing in on the 200-day in the $5.20 area as early as tomorrow morning if the free-fall continues.  

ON Semiconductor Corp. ON

Shares added to recent losses on Tuesday, closing down 5.42% to $70.35. The next support level for ON will be at the 200-day moving average right around $70.00. From a technical perspective, however, a break to the downside of a trading range above the $75.00 level that goes back to February has this stock set up for continued downside momentum, particularly if we see continued selling in the tech sector as a whole. 

Rambus Inc. RMBS

Rambus fell nearly 7% on Tuesday and unlike the other names on this list, it has seen no bounce-back in after-hours trading, where the stock has lost another 1% to $44.84. A considerable amount of technical damage was down to the RMBS chart on the day, but price did bounce off of trendline support at around $44.46 intra-day. This could be a key level for the rest of the week and a break to the downside may suggest $40.00 will be a level that is in play shortly.

Featured photo by Chris Karnbach on Unsplash